Hey everyone, it’s an awesome Monday morning and I’m charged up and ready to tackle the week. There’s so much exciting stuff happening around the office. It’s a perfect chance to prioritize my time for the week and hit the things that will make me the most successful for the week. Be sure you do the same. Start by checking out these articles. Here’s to a good investing week!
June 14, 2010 - This Week’s Topics:
- FBI To Target Mortgage Scammers
- Another Foreclosure Record in May
- Without Bait, Home Sales Slump
- NAR Spends $4.3 Million Lobbying in 1Q
- House Passes FHA Reform Bill
- Loss Severity on Short Sales 13% Less Than REOs
- Revenue Producing Activities
FBI To Target Mortgage Scammers
Starting as early as this week, the FBI is preparing to arrest hundreds of people in a nationwide crackdown on mortgage fraud. The list of offences includes encouraging borrowers to falsify their income on mortgage applications, misleading homeowners about foreclosure rescue programs and inflating home appraisals. This step is the latest in a series designed to curb lending practices that contributed to the housing meltdown. The misrepresentations and omissions are what lead to brokers, banks and other lenders to issue loans with unverified income and low credit scores. The recent round of foreclosure schemes involve financial firms collecting a fee for falsely promising borrowers that they will be able to keep their homes. In 2008, mortgage fraud-related losses totaled $1.4 billion. In the first six months of 2009, losses exceeded levels from the same period in 2008 by $208 million. The FBI’s 2009 mortgage fraud report will be released later this week. Historically, the arrests have coincided with the release of the report.
Another Foreclosure Record in May
May set another record, but not in a good way – it set the record for the highest number of home foreclosures – up 44% from May 2009. It’s the second consecutive record month for foreclosures. Foreclosure filings rose 1%, with one out of every 400 households receiving a filing. RealtyTrac, Inc. predicts that in June, we might just set a quarterly record, so things aren’t getting better yet. Nearly 3.1 million homes have been taken back by banks since April 2005. Lenders are working their way through the process of taking properties back from homeowners who stop paying on their mortgages. Bank sales of foreclosed properties accounted for more than 1/5 of all US home transactions in March, according to Zillow. Nevada maintains its lead with the highest rate of foreclosures for the 41st straight month, with Arizona, Florida and California following. Rounding out the top ten are Michigan, Georgia, Idaho, Illinois, Utah and Maryland.
Without Bait, Home Sales Slump
We’re starting to see that the homebuyer tax credit is impacting future sales more than first suspected, as home buying applications are down for the fifth straight week, according to the Mortgage Bankers Association. Demand for loans to buy houses fell 5.7% for the week ending June 4, the lowest level since February 1997. Purchase applications are 35% below their level from four weeks ago. People are not yet returning to the home buying market after the expiration of the tax credit program. Refinancing activity is also down, falling 14.3%. Mortgage rates are low right now, but there are other factors at play – many homeowners have already refinanced, others remain under water on their mortgage, while others still have uncertain job situations or damaged credit and don’t qualify for refinancing. Despite all this, refinancing accounted for 72.2% of all applications last week.
NAR Spends $4.3 Million Lobbying in 1Q
The National Association of Realtors, one of the most powerful lobbying groups on Capitol Hill, spent $4.3 million lobbying the Federal government in the first quarter of this year alone. They are pressuring for measures to help the ailing housing market. Together with their allies, the group successfully pushed for the first-time homebuyer tax credit last year. After additional lobbying, lawmakers agreed to extend the program to April of this year. In addition to lobbying for this relief, the group has lobbied on foreclosure relief, predatory lending, lead paint, flood insurance and more. The $4.3 million is 23% less than they spent during the fourth quarter of 2009.
House Passes FHA Reform Bill
Last week, the House of Representatives passed a bill intended to replenish the reserves of the FHA – the agency that insures mortgages against default. The FHA Reform Act (H.R. 5072) “enables the agency to reform its current mortgage insurance premium structure by shifting some of the upfront cost to the annual premium,” which will increase capital reserves and reduce the risk of insurance fraud. This gives the FHA the authority to nearly triple borrowers’ premium cap to up to 1.5%, and should generate an estimated $300 million each month. The average FHA borrower will pay $42 more in monthly premiums. The bill also makes it easier for the FHA to withdraw approval from lenders with high default rates and protect its insurance fund from losses on loans that don’t meet underwriting standards or are considered fraudulent. The minimum down payment remains at 3.5%. Supporters feel the bill will “rebuild the American dream of homeownership” yet still reduce federal spending by $2.5 billion over the next five years.
Loss Severity on Short Sales 13% Less Than REOs
Short sales are benefiting servicers. Due to the growing emphasis on keeping borrowers out of foreclosure, servicers are more inclined to look for alternative loss mitigation strategies. The loss severities for short sale properties are 13% less than the loss severities for REO sales. The percentage is even greater in states with extended foreclosure timelines – as much as 26%. Short sales also cost bond holders about half the amount in fees and advances. Short sales are producing favorable results for servicers, compared to REOs. Servicers with the least loss severity approach short sales from all angles – through outsourcing, dedicated short sale teams, working directly with brokers and setting list prices based on historical and geographical REO net proceeds. They also obtain interior valuations to make sure the offer is in line with the value of the house and has a better chance of getting the offer accepted. Together, these things help speed up the process, reducing the chances of a potential buyer walking away from the sale.
Revenue Producing Activities
The best of my best coaching students understand where to focus their energy...on revenue producing activities. The only thing that generates revenue is focused actions on tasks that make money. Always write down your revenue goal. Each of our top producing coaching clients, the one's making the really big numbers, understand how much they need to make each week to hit their monthly number. They've identified a revenue target and then created a plan to get there. They understand how many deals they have to close to make that $100,000. They understand how many deals fall away to better identify how many new cases will find success. They've each created their own funnel-effect to get the result that they wrote down and have taped to the wall or computer. They also understand the importance of measuring progress while working to that revenue number. Writing down a goal for your company revenue may sound like a silly exercise, but when you write something down, it seems to have sticking power. It's a daily reminder that works to keep us accountable. Otherwise, it is nothing more than an aspiration and not an actual goal.
Hope your week is filled with real estate investing success.
Until next time… ~Josh
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